Airfare floor policy opposed by low-cost carriers
VietNamNet Bridge - The proposed airport service surcharge increases and airfare control policy are expected to cause difficulties for low-cost air carriers (LCC).


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Jetstar Pacific (JPA), in a document to the Ministry of Transport (MOT) on suggestions to the draft decision on airfare management, proposed to apply floor and ceiling ticket rates for domestic flights.

The air carrier said that hot development in recent years has put pressure on the infrastructure system, including airports and terminals. 

In 2014-2016, the transport output on domestic air routes increased by 30 percent per annum. Meanwhile, air carriers had to reduce airfares and sometimes had to sell tickets at below cost prices to attract passengers.

The proposed airport service surcharge increases and airfare control policy are expected to cause difficulties for low-cost air carriers 

Under the calculation method suggested by JPA, the floor ticket rates would be between VND600,000 and VND1.2 million. As for the Hanoi-HCMC route, the floor airfare would be VND1.1 million.

The proposal has faced strong opposition from Vietjet Air, an LCC, which said that the application of the floor price mechanism will eliminate LCCs’ opportunities to cut  airfares to compete with other airlines on domestic air routes, and eliminate people’s opportunities to access aviation services. At present, 90 percent of the population still cannot access the services.

JPA and VJA are the two air carriers which often offer ‘super-cheap’ air tickets in big sales promotion campaigns. If the floor price mechanism is applied, people would no longer have the opportunities to fly at zero dong in the future.

Tran Hong Hoa, who often flies between Hanoi and Da Nang City to visit her father who lives in Da Nang City, has estimated that if JPA’s proposal is accepted, she will never be able to fly at VND400,000-500,000, while the airfare for the Hanoi-Da Nang flights will be no less than VND1.1 million.

Meanwhile, passengers have been warned that they would have to pay higher airport surcharges. ACV has urged MOT to approve the service fee adjustments. Airport surcharges now account for 1/3 or 2/3 of the airfares.

Vietnam Airlines, the nation’s flag air carrier, has decided to raise airfares by VND40,000-300,000 for economy class and VND100,000-500,000 for business class, commencing April 1.

Ngo Tri Long, former head of the Ministry of Finance’s Price Management Agency, said it was reasonable to impose ceiling price to prevent enterprises from setting high prices, while it would be a violation of the laws to set floor prices.

Other experts also have raised their voice in protest against the imposition of floor ticket rates, saying that the floor price mechanism is ‘non-market’, ‘anti-competitive’ and ‘unfair’.

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Thanh Mai

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